THE CUSTOMER EXPANSION PLAYBOOK Strategies for maximizing customer lifetime value through cross-sell and upsell
Introduction Revenue generation and customer experience are not mutually exclusive. Increased revenue through upsell and cross-sell activity can financially support the extra time and attention required to drive a positive customer experience in the enterprise. 1 Are your Customer Acquisition Costs (CAC) out of balance with your Customer Lifetime Value? B2B companies today across every industry from hardware to software to life sciences are shifting towards subscription-based revenue models. These models require more than just a new approach to pricing and product delivery. Your success depends on the ability to deliver customer success. Everything from organizational structure to product development to how you engage your customers must be reimagined. Empowered customers have done their research and they re demanding a lower cost of entry as well as guaranteed business outcomes. As markets become more competitive, acquisition costs rise. If you do not invest in customer expansion strategies that maximize CLV, then your new model will not be viable even if you effectively manage customer churn. As the is a global leader in providing outsourced, performancebased revenue growth outcomes, ServiceSource can help you leverage proven best practices and take a holistic approach to customer success management that will maximize CLV for greater revenue growth. This guide will help you better understand customer success and answer five critical customer expansion questions. How do I... ÎÎ Keep growing revenue from my installed base of customers? ÎÎ Organize my teams to cost-effectively expand customer revenue? ÎÎ Offer the right product to the right customer at the right time? ÎÎ Build best-practice processes? ÎÎ Measure the effectiveness of my customer expansion strategies? 1 Gartner, Tech Go-To-Market: Best Practices in Enabling Reseller Channel Partners in the Changing World of Cloud, Mark Paine 2016 2
Customer expansion basics In the B2B market, customer expansion efforts are quite often tackled by silos of teams. The marketing team initiates cross-sell and upsell campaigns, while account management or channel partners look to close the deal. Customer success and service teams are given SPIFFs or other incentives to pass along possible expansion opportunities. Your customer ends up feeling sold to during critical interactions. This puts you at risk of alienating your customers by giving the impression that you don t care about their business results, only about their money. Any approach to expanding CLV must be part of an over all framework to strengthen customer relationships and foster customer loyalty. On the next page, you will learn more about the importance of taking a holistic approach to customer engagement, but first let s cover customer expansion 101. CUSTOMER EXPANSION: ACTIVITIES AND PROCESSES AIMED AT EXPANDING YOUR CUSTOMER FOOTPRINT AND WALLET-SHARE. START BY IDENTIFYING CUSTOMER EXPANSION PLAYS AND OFFERS THAT MAKE THE MOST SENSE FOR YOUR BUSINESS: PLAY Increase Licenses (Upsell) Upsell Service Level Expand Services Lead Generation Multi-Year Upgrade Sell Consumables GOAL Sell additional licenses of products or services Upgrade customers from standard or bottom-tier service levels to the premium or top-tier service levels Sell adjacent services that support your solution, such as professional services or training Uncover additional sales opportunities using customer profiling and generate qualified leads for your account management team Sell multi-year contracts Sell consumable resources that are used alongside the product or service that you provide Bundle Offerings Warranty Conversion Trial Conversion Freemium Conversion Platform Upgrade Sell a wider variety of products to individual customers by offering specially priced packages Convert your customers from limited free offerings to premier warranty offers Convert trial accounts into paying customers Convert free accounts into paying customers Migrate legacy customers onto a new technology platform Technical Refresh Migrate legacy customers onto newer hardware or machines 3
Customer success management basics In order to thrive in the age of the empowered customer and effectively maximize customer lifetime value, you must take a holistic approach to customer engagement and define strategies to drive growth and customer retention. Too often, ongoing customer relationships are managed inconsistently, with multiple stakeholders, inefficient processes and inaccurate data. For example, too many B2B companies don t have the right mix of skilled people, best practices and the necessary technology to optimize customer revenue growth and retention. This results in higher customer cancellations, lower margins and missed revenue expansion opportunities. Investing in customer success management solutions and processes a holistic framework for growing and retaining revenue from existing customers will put you on the winning track. Customer Success Management THE FRAMEWORK FOR GROWING AND RETAINING REVENUE FROM EXISTING CUSTOMERS INITIAL SALE ONBOARDING & ADOPTION UPSELL & CROSS-SELL RETENTION & RENEWALS 4
Solutions This playbook recommends solutions and best practices to help you effectively manage the customer expansion upsell and cross-sell motions cross while allowing for alternative routes tailored to your specific business. These best practices will improve communication, build better relationships and transform your business into a customer revenue-driving machine. You will also have the opportunity to assess your own upsell and cross-sell programs capabilities to guide future performance improvements. Planning for Success Customer expansion requires the right team, meticulous planning, insights to action and consistent follow-through. We will explore proven best practices across three key areas in this ebook: ÎÎ Skilled people ÎÎ Proven processes driven by clean customer success management data ÎÎ Purpose-built technology and analytics People Foundation for Success Rethink your organizational structure to focus the right attention on customer experience after the initial sale. Your teams need to understand the value and business outcomes for each and every one of your products and services. Processes Insights to Action Use proven processes to minimize friction not only within your teams, but with your partners and customers as well. Fed by accurate and timely customer insights, effective processes lead to the right customer engagement play and optimized sales performance. Analytics Your Performance Gauge Deliver powerful insight into how well your customer expansion strategies are performing. With real-time reporting and data-driven insights, you gain transparency into performance and the ability to take corrective action when necessary. 5
People Skilled people are the essential ingredient to execute with precision and success. When it comes to customer expansion, timing is everything. If done right, it can strengthen your relationship with your customers. Done wrong, it can contribute directly to customer churn. No one likes being sold to, which means customers are not always keen to be transferred to an account representative when they have a specific problem that they are trying to solve. In the age of empowered customer, the answer to the question Who s in charge of customer expansion opportunities? is everyone. In a best-practice scenario, every last employee should understand the value proposition of your products and services. Winning at customer expansion requires synchronized team-work across departments and that often means shifting focus from departmental objectives to clearly defined customer objectives. A customer-obsessed team should bring a diverse set of skills that allow them to drive the right actions from clean customer success management data. THE DATA SCIENTIST Department: IT Data Management Knows: Data required and historical trends Expansion Role: Ensures that data is customer success management ready THE ENABLER Department: Training Knows: How to put knowledge transfer to work Expansion Role: Develop assets to help customers understand how add-on or premium products can help drive more value THE TRUSTED ADVISOR Department: Customer Success Knows: Customer health, key moments of truth and change management Expansion Role: Recommends solutions to business challenges while managing customer health THE STRATEGIST Department: Product/Solutions Knows: Customer journey, value and business outcomes Expansion Role: Outcome-based customer journey maps and value propositions THE CLOSER Department: Account Management Knows: The right offer or solution to solve customer pain points Expansion Role: Run plays that maximize customer lifetime value, while improving customer loyalty THE PROMOTER Department: Marketing Knows: How to create targeted, personalized offers that get attention Expansion Role: Drive customer expansion, engagement and loyalty 6
Benchmark your people capabilities OPPORTUNISTIC OPTIMIZED STRATEGIC Do you have an executive sponsor accountable for customer revenue? Do your teams understand their role in customer expansion? Do you offer product value and outcome training for employees? BENCHMARKING QUESTIONS Is your customer journey well defined? Does your training team build assets that include an overview of all of your products and services? Do you have team members that can sell and solve customer problems? Do you have a data scientist that provides insight into customer expansion triggers and predictive analytic technology? Do you organize your teams around the customer journey? Are all team members prepared to strategically focus on customer outcomes? DEFINE ROLES AND RESPONSIBILITIES In the opportunistic phase, your primary focus is to establish clear roles and responsibilities to eliminate friction points. With a defined executive sponsor that is accountable for customer revenue, you will be able to eliminate current organizational silos and begin to take a more holistic approach to customer success management. BEST PRACTICES CUSTOMER-INFORMED TEAMS In the optimized phase, your teams are prepared to demonstrate the value of the upsell, crosssell or other customer expansion opportunity. With a clear picture of the entire customer journey and critical touchpoints, teams have a better understanding of the customer. Customer success or account managers are trained in solution selling, as well as experts in increasing customer retention. CUSTOMER-CENTRIC TEAMS In the strategic phase, a data scientist reviews trends and provides insights to inform strategy. Teams are organized around the customer journey and are cross-trained to provide an extraordinary experience. Every team member has the ability to explain how products and services will help the customer achieve goals, solve problems or provide business outcomes. 7
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Real-World Example Incremental bookings with a holistic approach to customer success management. COMPANY A leading online meeting provider. CHALLENGE A rapid growth period led to an array of challenges that needed to be addressed for them to retain market share. One of the key struggles faced was helping customers understand and realize the full value of their product, rather than just the value of what they were sold at the time of purchase. Retention rates were in the low 60s. SOLUTION Proactive adoption and retention approach focused on driving knowledge of product value and associated business outcomes. BENEFIT Increased retention rates by over 20 points and drove over $60M in incremental bookings. Processes Empower your people with accurate and timely insights that drive consistent and effective customer engagements. Driving the right customer engagement requires data-driven best-practice processes that proactively address customer health risks, while triggering prescriptive sales plays at the right time. Effective customer expansion processes will set the tone for a healthy relationship between your internal teams, channel partners and ultimately your customers. One of the biggest challenges to customer expansion is identifying which customers have an actual business need for an upgrade, add-on or warranty extension. Customer success and account managers need to be informed of patterns in usage data that indicate when a customer has the highest propensity to buy. To solve this challenge, you need to be able to successfully separate the signal from the noise in your data. This is done with product usage and behavior analytics, an integral part of your clean customer success management data. By regularly monitoring key customer criteria and behavior, you can identify optimal times to offer a new product or service. 9
Insights to action Pricing and Packaging Evaluate your pricing and packaging to ensure it is based on business outcomes and offers the right incentive triggers for customers to invest further in your company. Pricing should include guidelines around discounts and campaign bundles. Customer Insight Analytics Become data-driven to successfully separate the signal from the noise in your data. Perfect Timing Trigger automated and personalized marketing campaigns directly from customer usage and lifecycle analytics to target the right customers, with the right offer, at the right time. Training and Tools Provide customer success, account and service managers with the training and tools required to perform consultative selling based on customer engagements. Messaging and Sales Empowerment Empower sales reps with insight into customer propensity to buy, as well as talking points to engage and close the deal more effectively.
Benchmark your customer expansion processes OPPORTUNISTIC OPTIMIZED STRATEGIC BENCHMARKING QUESTIONS Do you have an executive sponsor accountable for customer revenue? Do your teams understand their role in customer expansion? Do you offer product value and outcome training for employees? Is your customer journey well defined? Does your training team build assets that include an overview of all of your products and services? Do you have team members that can sell and solve customer problems? Do you have a data scientist that provides insight into customer expansion triggers and predictive analytic technology? Do you organize your teams around the customer journey? Are all team members prepared to strategically focus on customer outcomes? DEFINE ROLES AND RESPONSIBILITIES BEST PRACTICES CUSTOMER-INFORMED TEAMS CUSTOMER-CENTRIC TEAMS In the opportunistic phase, your primary focus is to establish clear roles and responsibilities to eliminate friction points. With a defined executive sponsor that is accountable for customer revenue, you will be able to eliminate current organizational silos and begin to take a more holistic approach to customer success management. In the optimized phase, your teams are prepared to demonstrate the value of the upsell, crosssell or other customer expansion opportunity. With a clear picture of the entire customer journey and critical touchpoints, teams have a better understanding of the customer. Customer success or account managers are trained in solution selling, as well as experts in increasing customer retention. In the strategic phase, a data scientist reviews trends and provides insights to inform strategy. Teams are organized around the customer journey and are cross-trained to provide an extraordinary experience. Every team member has the ability to explain how products and services will help the customer achieve goals, solve problems or provide business outcomes. 11
REAL-WORLD EXAMPLE A Client Success Story Customer Retention Improvement and Cross-Sell Company A leading travel expense management company. Problem The company lacked a standard process for managing customer health or next best action. Their highly reactive engagement process resulted in low retention rate and poor compliance. Solution Established and deployed a dedicated sales and enablement team guided by consistent best-practice customer success management processes. Benefit Over time, the company anticipates $3M 6M retention improvement and 5% cross-sell uplift through compliance.
Analytics Consistently monitor and report performance to executives and facilitate continuous improvement Performance analytics provide you with a complete understanding of the corresponding processes and customer success plays that enhance operational and sales productivity. Today, customer expansion opportunities and quotes are typically captured, measured and tracked through a CRM system that is designed for new customer acquisition, or worse yet, through manual spreadsheets, emails and voicemails. Without customer expansion analytics, you can t accurately assess and compare performance of current processes and determine what constitutes success. Since customer success and account managers are unaware of their performance and how they rank among peers, they can t effectively manage and continuously improve. INSIGHT THROUGH KPIs AND ANALYTICS Accurately measure performance and track real-time, standardized KPIs associated with customer success management. For example, analytics based upon Key Performance Indicators (KPIs) such as time to value allow you to assess customer success representatives that are proactively managing onboarding, adoption and engaging customers. These KPIs should be visible across teams to understand customer health before any selling activities take place. ANALYTICS DRIVE ACTION ANALYTIC FEEDBACK IMPLICATIONS NEXT ACTIONS Renewal rate up Revenue per rep up Cross-sell and upsell plays are working Hire more reps to increase sales coverage, and begin to roll program out to other teams and/or channel partners Renewal rate up Revenue per rep down Reps are effective, but plays are not driving adequate revenue Investigate discounting processes and adjust pricing and packaging models Renewal rate down Revenue per rep down Play and reps are both under performing Provide additional training for reps and research pricing and packaging Renewal rate down Revenue per rep up Customer satisfaction is being impacted by expansion processes Focus on customer success and delivering business outcomes 13
Insights to action Without automation, customer expansion sales teams can access 5 7 systems to process a single opportunity. IDENTIFY THE IMPORTANT METRICS Tracking and refining the performance of your customer expansion efforts requires relevant metrics. Here is some of the data you may want to analyze for each of your established sales plays: ÎÎHow often was the play run? ÎÎWhat was the success rate? ÎÎWhen it didn t work, why didn t it? ÎÎWhat customer segment was most likely to buy? ÎÎWhat was the impact on the overall retention rate and customer lifetime value?
Benchmark your customer expansion processes OPPORTUNISTIC OPTIMIZED STRATEGIC BENCHMARKING QUESTIONS Do you have KPIs and metrics in place to measure performance? Do you compare and rank reps performance? Do your reps receive emails with lists of opportunities weekly or quarterly? Do you measure standard customer success management KPIs such as Retention Rate, Revenue per Rep or Close Rate? Are your reps evaluated quarterly based on established metrics? Do you have an automated system to access quotes and opportunities? Do you measure reps by KPIs such as customer health, conversion rate, close rate and resolution rate? Are your reps reviewed monthly with analytics and compared against peers? Do you leverage an automated tool for next-best action tracking? BEST PRACTICES PERFORMANCE MONITORING COMPARATIVE ANALYTICS NEXT-BEST OFFER In the opportunistic phase, consistently monitor vital KPIs such as in-quarter and final retention rates. At the same time, provide reps with the ability to monitor these trends so they can track their own performance. Finally, create automated performance reports and make them available. In the optimized phase, use realtime KPIs to facilitate peer-to-peer performance comparisons and encourage healthy competition among reps. These KPIs can include days-in-advance, contacted and quoted opportunities. Finally, compare reps to one another based on specific performance metrics and enforce policies relative to how they rank against each other. In the strategic phase, implement a next-best offer or action automation tool. This predictive tool will serve as a primary vehicle to trigger next-best action to orchestrate engagement based on KPIs and customer health and behavioral data. 15
REAL-WORLD EXAMPLE A Client Success Story Measuring Performance and Improving Retention Rates Company A leading global software provider. Problem With limited visibility into performance, the software provider was missing key renewal opportunities while inaccurately forecasting revenue goals. Solution The company deployed a cloud-based portal to manage opportunities and measure performance based upon established KPIs. Benefit Increased visibility into key customer success management metrics improved forecasting accuracy within three percentage points of actual bookings.
Course summary People Foundation Your people are set up for success and empowered with essential data and insight. Processes Insights to Action You have a well-planned and measurable strategy with A/B testing, analysis and iterative improvements that minimize risk and optimize campaigns. Analytics Gauge You monitor and strategically utilize real-time, in-depth analytics to form targeted customer success and sales plays and trigger next-best action. Crossing the finish line Congratulations! You re on your way to greater revenue growth. We hope the tools, best practices and case studies outlined in this playbook will help you to optimize your own customer expansion motions. PEOPLE FOUNDATION Your people are set up for success and empowered with essential data and insight 1 2 PROCESSES INSIGHTS TO ACTION You have a well-planned and measurable strategy with A/B testing, analysis and iterative improvements that minimize risk and optimize campaigns ANALYTICS GAUGE You monitor and strategically utilize real-time, in-depth analytics to form targeted customer success and sales plays and trigger next-best actions 3 4 CROSSING THE FINISH LINE Congratulations! You re on your way to greater revenue growth. We hope the tools, best practices and case studies outlined in this playbook will help you to optimize your own customer expansion motions. 17
Recap Winner s stand the rewards of customer expansion People Clear roles and responsibilities set team members up for success. Better insight into the customer journey and experience helps teams collaborate and eliminates friction points. Processes Accelerated development and continuous improvement of customer expansion business processes define a clear growth path with a focus on process improvement and lowering the cost to serve. Analytics Better insight into clear metrics help executives and managers identify areas of improvement and help prioritize investment decisions. Conclusion There are as many different definitions for success as there are customers. You can t expect a standardized customer health score to capture all of the subtleties and variations. To deliver customer success throughout the customer lifecycle, you need to move beyond standardized formulas and into customer success planning. A carefully considered and effectively executed Customer Success Plan will help you deliver on expectations, manage exceptions, and create customers for life. To learn more about how customer success planning drives greater revenue growth, contact ServiceSource today. 19
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